Richards v Richards
[2015] VSC 335
•17 July 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROBATE LIST
S CI 2014 06071
| ADRIAN BRENT RICHARDS | Plaintiff |
| v | |
| GARRY ASHLEY RICHARDS and LINDA DAWN RICHARDS | Defendants |
---
JUDGE: | McMillan J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 27 April 2015 |
DATE OF JUDGMENT: | 17 July 2015 |
CASE MAY BE CITED AS: | Richards v Richards |
MEDIUM NEUTRAL CITATION: | [2015] VSC 335 |
---
WILLS & ESTATES — Executor’s commission —Where the will does not provide for commission — Where defendants initially sought commission at 5 per cent in modest estate — Where defendants seek commission at 2 per cent trial — Commission allowed at 1 per cent on sale proceeds of deceased’s home — Administration and Probate Act 1958, s 65 — Supreme Court (Administration and Probate) Rules 2004, Order 10 — In the Estate of Stone (deceased); Patterson v Halliday [2003] VSC 298
COSTS — Where plaintiff beneficiary sought information from defendants concerning estate — Where defendants fail to provide timely and adequate information —Where plaintiff seeks distribution of estate — Disputes between parties adversarial — Defendants seek costs against plaintiff — Plaintiff seeks costs be taxed with directions for certain disallowances — Where costs disproportionate to the issues raised — Where defendants have no client costs agreements — Where defendants solicitor’s invoices lack sufficient detail — Supreme Court (General Civil Procedure) Rules 2005, r 63.07 — Supreme Court Act 1986, s 24 — Hall v Carney (No 2) [2012] SASCFC 105
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M Lapirow | Stephens Lawyers & Consultants |
| For the Defendant | Mr R Young | Best Hooper |
HER HONOUR:
By originating motion filed on 14 November 2014, the plaintiff, Adrian Brent Richards (‘the plaintiff’), seeks the distribution of the estate of his deceased father, Edward Bruce Richards (‘the deceased’), in accordance with his will dated 3 April 1981 (‘the will’). The principal asset of the deceased’s estate was a property at 13 Elora Road, South Oakleigh (‘the property’). In support of his claim, the plaintiff filed an affidavit affirmed 13 November 2014 (‘the plaintiff’s affidavit’).
The deceased died on 18 November 2012. Probate of the will was granted to the defendants, Garry Ashley Richards and Linda Dawn Richards (‘the defendants’), on 5 June 2013. The plaintiff is the younger brother of the defendants.
On the first directions hearing on 12 December 2014, the defendants urged that this proceeding be stayed, pending the resolution of a proceeding between the same parties issued on 9 December 2014 in the Melbourne Magistrates’ Court. The defendants’ complaint and statement of claim in the Magistrates’ Court (‘the Magistrates’ Court complaint’) claimed, amongst other matters, that the plaintiff was liable to the deceased’s estate for certain loans made to the plaintiff of $32,000 by either the plaintiff’s mother or the deceased commencing in about 2003. Of this amount, the plaintiff claimed that $18,000 was a gift (‘the loan/gift issue’). The Magistrates’ Court complaint sought repayment of $32,000 to the estate plus interest and costs in responding to the plaintiff’s ‘activities’ as set out in paragraphs 11 to 18 of the statement of claim.
Counsel for the plaintiff informed the Court that the Magistrates’ Court complaint had not been issued or served on his client. The copy complaint exhibited to Mr Robinson’s affidavit sworn 11 December 2014 did not contain a court number or the date that it was filed and included the statement in capital letters on the last page:
THIS COMPLAINT IS VALID IF IT BEARS THE ALLOCATED COURT NUMBER AND THE DATE OF FILING’.[1]
[1]Pursuant to the r 4.08.4 of the Magistrates’ Court General Civil Procedure Rules 2010.
The loan/gift issue and the costs referred to in the Magistrates’ Court complaint were matters raised by the plaintiff in this proceeding and both were relevant to the administration of the estate of the deceased, including its distribution to the beneficiaries. The attempt by the defendants to assert that the Magistrates’ Court complaint was a valid proceeding was erroneous. Further, the Magistrates’ Court complaint document bears a date subsequent to the issuing of the plaintiff’s proceeding in this Court.
At the directions hearing, orders were made that the defendants forthwith discontinue the Magistrates’ Court complaint so that all issues between the parties could be determined in the one proceeding being the Supreme Court proceeding.
At the directions hearing on 12 December 2014, the issues in dispute between the parties were identified as follows:
(a) The loan/gift issue and whether the plaintiff owed an amount of under $40,000 to the estate. This amount included the alleged loans from either his deceased mother and/or the deceased commencing in about 2003 totalling $32,000 together with interest pursuant to the Penalty Interest Act 1983. In the Magistrates’ Court complaint, it was stated that the plaintiff acknowledged that he received advances from his parents totalling $32,000 but claimed $18,000 of that amount was a gift;
(b) The defendants referred to a foreshadowed claim for executors’ commission. The deceased’s will makes no provision for the payment of commission to the executors of the estate. Unless agreement can be reached by the beneficiaries of this estate, all of whom are sui juris, the defendants are required to make an application to the Court for payment of commission. Three issues arose from this foreshadowed claim for commission: whether the plaintiff had agreed to a claim for commission at 5 per cent; whether commission should be claimed in any event and, if so, at what percentage;
(c) The issue of costs incurred because of the excessive correspondence between the parties. The plaintiff contended that the defendants should be personally liable for those costs and his own costs, including his costs in issuing this proceeding seeking the distribution of the estate;
(d) The costs of an affidavit sworn 11 December 2014 from the solicitor for the defendants that counsel for the defendants sought to file on the day of the directions hearing. The affidavit exhibits a letter dated 9 December 2014 from the defendants’ solicitor to the plaintiff’s solicitor. The plaintiff objected to the exhibit on the basis that it contains inadmissible and controversial matters. The costs of that affidavit were reserved.
The proceeding was set down for trial on 27 April 2015 with directions given for the filing of position statements and outlines of submissions.
On 8 April 2015, the plaintiff filed a short position statement dated 7 April 2014 in respect of the three issues:
(a) In respect of the loan/gift issue, the plaintiff referred to his letter dated 25 September 2014 whereby he acknowledged a liability to the estate for $14,000.[2] This meant the quantum of the dispute on this issue was $18,000 and not $32,000;
[2]Exhibit AR-30 to the plaintiff’s affidavit affirmed 13 November 2014, [55].
(b) The issue of the foreshadowed claim for executors’ commission did not arise as an application had not been made by the defendants and no material had been filed to justify an order for any amount, let alone the maximum amount of 5 per cent;
(c) The issue of costs raised two issues:
(i) the estate accounts provided to the plaintiff by the defendants on 28 August 2014 show nine payments totalling $14,214.61 from the estate to the defendants rather than to the creditors, with the payments not supported in the material provided to the plaintiff. The major payment is $9,628.83 to the first defendant;[3]
[3] By letter dated 15 April 2015, the solicitors for the plaintiff informed the Court that the plaintiff had now been provided with materials in respect of the nine payments totalling $14,214.61 and the plaintiff no longer took issue with those expenses.
(ii) the bills of costs provided by the defendants’ solicitors provide no appropriate detail as between the solicitor and client and are not adequate for the purposes of ascertaining the legal expenses incurred by the estate arising from the areas of dispute being the delay in responding to the plaintiff’s request for information and the costs of the correspondence seeking commission;
(d) The plaintiff sought that the costs should be taxed by the Costs Court with directions by the Court as follows:
(i) to disallow costs from the estate arising from its failure to make timely responses to the plaintiff;
(ii) to disallow costs from the estate arising from the claim for commission; and
(iii) to apportion the value of any item where the fee claimed relates to an area that is disallowed and to an allowable charge.
On 10 April 2015, the defendants filed a position statement dated 9 April 2015:
(a) They sought the sum of $32,000 and interest from the plaintiff and set out their reasons for seeking this amount and interest;
(b) They did not seek an order for executors’ commission and stated that they would make application ‘in due course’ by way of application to an Associate Judge on the basis that the application should not be dealt with by the Judge in the Probate List; and
(c) They sought payment from the plaintiff for the expenses incurred by the estate as set out in the Magistrates’ Court complaint. This is a reference to paragraphs 11 to 19 of the complaint said to be $6,120.29 as at 9 December 2014 and continuing.
As a result of the defendants’ position statement, by letter dated 15 April 2015, the solicitors for the plaintiff requested the Court list the proceeding for directions in light of the defendants’ position on their foreshadowed claim for commission.
The summary procedure for claiming executorial commission is set out in Order 10 of the Supreme Court (Administration and Probate) Rules 2004 (‘the Rules’). An application for commission is commenced by filing a summons and an affidavit in support.[4] At the time of filing a summons and an affidavit, the solicitor for an executor should file with the Court a true and just account, verified by affidavit, of the administration of the estate in the prescribed form under the Rules.
[4] Rule 10.02 of the Rules.
In the usual case, an application is listed for an ex parte directions hearing before an Associate Justice. In this proceeding, because of the nature of the disputes between the parties and the modest size of the estate, directions were made for any claim for commission by the defendants to be heard and determined on 27 April 2015, at the same time as the other disputes.
Notwithstanding the directions made concerning the defendants’ foreshadowed claim for commission being heard and determined on 27 April 2015, the defendants did not file a summons seeking commission or an affidavit in support. Nor did they file a true and just account, verified by affidavit, of the administration of the estate prior to the trial on 27 April 2015.
In further submissions dated 20 April 2014, the plaintiff conceded for the purposes of the proceeding that the disputed amount of $18,000 should be treated as a loan repayable by him to the estate on demand. At the commencement of the trial, the Court was informed that the defendants would not press their claim for interest on that amount.
The issues at trial
As a result, at trial, two issues remained for consideration; namely, the defendants’ foreshadowed claim for commission and costs.
Notwithstanding the position taken by the defendants in their position statement dated 9 April 2015, the Court was informed that the defendants would proceed with their claim for commission. Counsel for the defendants then handed to the Court and counsel for the plaintiff an amended position statement for the defendants and an affidavit verifying the accounts for the estate sworn by the defendants on the day of the hearing.
In respect of the amount claimed for commission, counsel for the defendants informed the Court that the defendants no longer sought commission of a fixed rate of 5 per cent but did seek commission at a rate of 2 per cent on capital and 2 per cent on income, although counsel was unable to state what that amount might be in dollar terms.
Counsel also stated that he was unsure whether the Court would decide if commission should be paid to the defendants and the issue of the quantum of the commission would then be referred to an Associate Judge. Counsel was reminded of the directions hearing held on 12 December 2014 when the Court determined that it was desirable for all issues in dispute between the parties to be heard and finalised, including any foreshadowed claim for commission. This was because the estate was modest in value and there had not been any distribution to the beneficiaries notwithstanding the fact that the deceased died on 18 November 2012. The directions made on the day were to facilitate the determination of all issues and a date was fixed for the final hearing of the proceeding.
Executors’ commission
Section 65 of the Administration and Probate Act (1958) (‘the Act’) provides:
it shall be lawful for the Court to allow out of the assets of any deceased person to his executor ... such commission or percentage not exceeding Five per centum for his pains and trouble as is just and reasonable.
An executor is prima facie expected to act gratuitously. However, in his seminal book on executor’s commission,[5] Eric Vance wrote:
generally speaking, ... the principle to be adopted is that unless ... [a]n objector establishes otherwise ... [an] administration will be presumed to be on proper lines and the executor will be granted commission.[6]
[5]Eric Vance, The Law and Practice in Victoria and an Examination of the Case Law of Australia and New Zealand relating to Executors Commission (1969) (‘Vance’).
[6]Ibid 150.
In In Re White; Tweedie v Attorney General where Kellam J (as he then was) adopted the views expressed by Vance holding that if the Court is satisfied that there has been no impropriety or maladministration, ‘in a proper case’ as a matter of statutory construction ‘[s 65] grants [the Court] an unfettered discretion to allow such remuneration as is fair, just and reasonable in all of the circumstances of the case’. [7]
[7](2003) 7 VR 219, 230.
In an affidavit in support of a claim for commission, an executor should set out fully the ‘pains and troubles’ he or she incurred in administering the estate. The Court will only grant commission for an executor’s past conduct and not his or her future ‘pains and troubles’.
In In the estate of Stone (deceased); Paterson v Halliday,[8] Smith J cited with approval the following passage from Vance:
the expressions ‘pains’ and ‘trouble’ have been defined in the New Zealand case of re Allan McLean deceased, ‘pains’ – as responsibility, anxiety and worry, and ‘trouble’ – as covering the work done.
[8][2003] VSC 298 (18 August 2003), [30] (Smith J).
The following matters are usually included in the affidavit, if applicable in the circumstances:[9]
[9]These matters are suggested by the learned authors of the subscription service, Wills, Probate & Administration Service (Vic) at 50,105.
(a) the details with respect to an executor arranging the funeral;
(b) dealing with the estate assets immediately after death;
(c) the time spent ascertaining and getting in the assets;
(d) the time and effect spent in managing any business or property of the deceased;
(e) the time and effort spent in meeting with any co-executor, accountant or lawyer;
(f) details of any unusual matters or any matters requiring particular skill and judgment, such as any court actions run, unusual assets that have been transferred, any emotional difficulties and any other matters dealt with by an executor in administering the estate.
The affidavit should also set out what proportion of work has been delegated to accountants and lawyers and has already been paid for by the estate.
Where there are multiple executors making an application for commission, the usual order is for commission to be awarded as a total sum, leaving it to be divided as the executors may privately agree.[10] Sometimes commission is awarded unequally amongst the executors, for example, Watters, Re Estate of Dibbs[11] where commission was allowed at 0.25 per cent on the value of a unit to one executor for the work he did in respect of the transfer of the unit but not to the other executors who were the beneficiaries of the transfer.
[10]Condon v Miller [1981] VR 465, 467 (King J).
[11][2006] NSWSC 1277 (28 November 2006), [13].
In the case of In the estate of Stone (deceased); Paterson v Halliday,[12] Smith J set out the following factors that a Court will consider in assessing executorial commission:
[12][2003] VSC 298 (18 August 2003), [30] (Smith J).
(a) the work and judgment involved in the realisation of assets and earning income;
(b) the extent of administrative activities;
(c) the responsibility generally;
(d) the amount of work done not reflected in financial terms;
(e) how long the estate was administered;
(f) the size of the estate and its capacity to pay;
(g) the work of a non-professional character not undertaken by the applicant and performed by professionals; and
(h) executors’ pains and troubles relative to the result.[13]
[13]Ibid [30].
If an executor has delegated some of his responsibilities to professionals and these services have been paid for, the delegated work will not be taken into account for the purposes of determining the executor’s pains and troubles.[14] Where the corpus or income is got in and realised with the assistance of professional agents or solicitors, the court may reduce the amount of commission as the estate should not pay twice for services rendered and preformed and charged to the estate. However, an executor’s actions in dealing with and making decisions in relation to the advice of these professionals is relevant for the purposes of determining the amount of commission[15].
[14]Vance at 143.
[15]Hawkins v Barkley Brown [2010] NSWSC 48 (8 February 2010), [60].
Other factors that may be taken into account are whether there has been any litigation, such as testator family maintenance claims against the estate, and whether there is conflict in relation to some of the distribution of the assets of the estate.[16] However, as Slattery J said in Hawkins v Barkley Brown:
The fact that the executor is involved in supervising the professionals involved in the litigation to maintain the estate’s interests in the litigation is a relevant consideration in assessing the proper percentage commission, provided the litigation is a necessary step in the administration of the estate.[17]
[16]Ibid [53]. See also, Atkins v Godfrey [2006] WASC 83, [86],[94] (Le Miere J); Hawkins v Barkley-Brown [2010] NSWSC 48, [72]-[73] (Slattery J).
[17]Hawkins v Barkley Brown [2010] NSWSC 48 (8 February 2010), [53].
Where there has been delay in the administration of the estate, such conduct may disentitle or reduce an executor’s commission, such as no commission on certain assets after the date when distribution should have occurred.[18]
Quantum of remuneration awarded
[18]Chiro v Linton (No 2) [2009] SASC 197 (2 July 2009).
In the past, Victorian courts had followed the Barr Smith scale in determining the quantum of executor’s commission. The Barr Smith scale was laid down in the South Australian case of In re Barr Smith[19] and its formula has been followed in Victoria.[20] However, there is no fixed scale for work and the Barr Smith scale is used as a very general guide as the figures are now fairly old.
[19][1920] SALR 380.
[20]Re Chirnside [1956] VLR 295.
The Barr Smith Scale allows for different rates of commission on the following categories:
(a) special assets got in and realised, such as cash and money in bank accounts — 1.5 per cent on the first $2,000; 1 per cent on amounts from $2,000 to $200,000 and 0.75 per cent on amounts over $200,000;
(b) other assets (such as land) got in and realised — 5 per cent on the first $2,000; 2.5 per cent on amounts over $2,000;
(c) assets (other than cash) distributed in specie — 1.25 per cent on the first $20,000; 0.75 per cent on amounts over $20,000; and
(d) income — 5 per cent of the first $2,000 per year; 2.5 per cent on amounts over $2,000.
More recently, the courts have moved away from the Barr Smith Scale not only because it is out-dated but also because the scale does not take into account the non-financial factors identified by the courts as being relevant to the quantum of commission.
In Creer v Estate of Peter Windeyer J referred to the out-dated nature of the scale and their lack of relevance in 2007:
In considering a proper remuneration for executors in such cases and taking into account what has been the percentage allowed for capital collections and income collections ... the figures can seem very large, due to inflationary pressures over the last 20 or 30 years. To a large extent this has been dealt with by reducing the commission percentages which would have been allowed 25 or 30 years ago to bring about a reasonable result. However, it must also be borne in mind that inflation has depreciated money value in the same way over those 25 years. In most estate accounts there is no problem about this and deciding what is reasonable. ... Scales of the type called the Bar Smith scale ... or those set out in Vance ... [in 1969] have very limited relevance in 2007.[21]
[21][2007] NSWSC 1291 (19 November 2007), [29].
In Atkins v Godfrey[22] Le Miere J said that the ‘proper approach’ under the equivalent West Australian provision for commission was to ‘form an overall assessment of what remuneration is just and reasonable rather than apply the Barr Smith scale’. In that case, his Honour held that he would have:
allowed an amount slightly more than the amount calculated by application of the Barr Smith scale ... because of the additional responsibilities and difficulties imposed upon the plaintiff by reason of the Inheritance Act matter and conflict between the defendants in relation to the distribution of some of the assets of the estate.
[22][2006] WASC 83, [89]
In Szmulewicz v Recht, Mukhtar AsJ considered that 3.5 per cent of corpus tends to be at the ‘top end of the scale’.[23]
[23][2010] VSC 447 (6 October 2010), [18].
In Re Estate of D A Lindsay commission was fixed at the rate of 1 per cent where the administration of the estate by the executor was at the ‘simple end of estate administration’.[24]
[24][2004] NSWSC 578 (28 June 2004), [15].
In Hawkins v Barkley Brown[25] Slattery J rejected an argument that commission should be assessed on an hourly rate and reinforced the discretionary nature of an award for commission. His Honour stated that it is not limited by any statutory requirement that it be justified according to a schedule of rates.[26] His Honour also alluded to the difficulties in quantifying, in monetary terms, the skills of a non-professional executor. In this regard, his Honour said that the hourly rate argument seeks to reduce the exercise of a subtle discretion to mere economics.[27]
[25]Hawkins v Barkley Brown [2010] NSWSC 48 (8 February 2010).
[26]Ibid [64].
[27]Ibid [65].
The defendants’ claim for executors’ commission
As stated, the defendants produced an affidavit verifying the administration of the estate during the hearing and proceeded by way of oral evidence.
The defendants sought commission of 2 per cent on capital and 2 per cent on interest for executors’ commission, principally on the basis of pains and troubles associated with clearing out and fixing up the deceased’s property. They submitted that their claim reflects the work done by them which caused the increased value of the property when it was sold in November 2013, being $185,000 over and above the Council valuation for the property.
In their written amended final submissions, the defendants submitted:
The defendants spent approximately 6 hours with lawyers in the administration of the estate. They also spent approximately 1410 hours cleaning and preparing the property … for sale. They spent approximately 60 hours resisting a town planning application and VCAT proceedings in relation to the development of the adjoining property. The time spent by the defendants resulted in the value of the estate being increased because of the work that they did. The defendants have also had to deal with the plaintiff in this proceeding which has been acrimonious and stressful for them.
In written closing submissions, counsel for the defendants submitted that the value of the work done by the defendants should be estimated at $20 per hour for each of the defendants, which at that rate would quantify at $29,000 for each of them. The defendants noted that the plaintiff did not challenge the hours worked by the defendants or the rate of $20 per hour. On that basis, counsel submitted commission of $14,682 should be awarded, being 2 per cent on capital of $715,275 and $377 being 2 per cent on income of $18,800. It was contended that this amount would take account of the responsibility, stress and hard work that the defendants had to undertake to realise the assets of the estate.
The defendants’ oral evidence
The first defendant described his father’s property at the date of his father’s death as ‘pretty dilapidated’, with the house run down and the garden overgrown. He said that the improvements to the house were made mainly on the inside. The carpets had to be pulled up because they ‘stank’ of urine. A new septic toilet had to be installed. The linoleum in two rooms and the tiling in the laundry and on the porch were replaced. The entire house was painted, including the robes. Two rotten windows were replaced and new blinds were installed. Holes in the ceiling were sealed. The first defendant said he did not repair the weatherboards at the back of the house and there were some rotten weatherboards out the back, however they did spray the house down with a high pressure hose. In the garden, the trees were pruned, the grass mown and the weeds eradicated. The second defendant corroborated the evidence of the first defendant on the state of the property stating that the property was not in a liveable condition at the time of the death of the deceased.
The first defendant gave evidence that he and the second defendant did most of the work, but that his daughter, his son-in-law as well as the second defendant’s partner all chipped in. The second defendant said that she tended not to work on the house on her own with either her partner, Cheryl, or the first defendant’s daughter, accompanying her. The plaintiff took no part in the renovation or cleaning of the property.
An electrician was employed to change most of the lights and attended to other small electrical tasks. Security lights and two security cameras were also installed at the property.
The first defendant estimated that the renovation of the property took around 235 days in total over the period of a year, estimating that he worked around six hours a day. He estimated that he and the second defendant went to the property most weekends in the 12 months prior to the auction and, after he retired in July 2013, he spent three or four days per week on average at the property. The first defendant did not keep any records or timesheets for the amount of the work he carried out on the property.
The second defendant estimated that, over the course of the year prior to the sale of the property, she spent most weekends there, for six hours each day on average. She guessed that she spent about 1,400 hours improving the property. Like the first defendant, she did not keep any sort of record for the amount of the time she spent improving the property.
The first defendant said that the council valued the house at $435,000 and produced the rate notice showing the Council’s Capital Improved Value as $435,000 with the operative valuation date as at 1 January 2012. The property sold at auction in November 2013 for $610,000. Based on these figures, the first defendant estimated that by their work, the defendants had improved the value of the property by $185,000. The first defendant said that they spent around $12,000 to $13,000 on materials to do up the house and were reimbursed by the estate for these amounts.
The first defendant gave evidence that the defendants went to two real estate agents and engaged Hodges Real Estate (‘Hodges’) as their selling agent for the property. He said that they spent a lot of time with them. Once the renovation had been completed, Hodges took photographs of the house. The first defendant guessed that he spent at least 10 hours with Hodges in total, perhaps a little more. He agreed that the defendants specified a reserve price of $590,000 for the sale of the property.
The second defendant said that she spent about 20 hours all up in consultation with Hodges and the conveyancers for the sale, Conveyancing Excellence. Before engaging Hodges, the second defendant obtained a valuation from Buchanan and Company Pty Ltd valuing the property at $535,000 for the property as at 3 July 2013, based on comparable sales within the locality. The second defendant said that after the sale of the property, someone at Hodges told her the new owner wanted to rent out the house. She also agreed that the house has since been knocked down.
The first defendant recounted that they had difficulty with the neighbour, who proposed to build two storey units on the adjacent block to the property. He estimated that the defendants spent about 20 to 25 hours opposing the proposal, including petitioning local residents and opposing the neighbour’s application at the Victorian Civil and Administrative Tribunal.
The second defendant also referred to work done in attempting to prevent the development of the adjacent block, in order to protect the value of the estate’s property. Counsel for the plaintiff objected to this evidence on the basis that the second defendant was not qualified to assess whether the development would have any effect on the property’s value. While that is so, the question whether the second defendant did the work claimed is distinct from the question whether the work increased the value of the property. A fortiori, whether opposition to the development is sufficient to support a claim for executors’ commission is another question altogether. The evidence was allowed and the second defendant estimated that she spent about 30 hours opposing the development.
The first defendant said that the solicitors for the estate managed the collection of other assets of the estate, including the shares in IOOF and Australian Unity. He also made a ‘rough guess’ that he spent 20 hours or so in communication with the solicitor for the estate but he did not keep records of the time spent with the solicitor. The second defendant estimated that she spent 25 to 30 hours in consultation with the estate’s solicitor.
The first defendant gave evidence that over the past two years the relationship between him and the plaintiff has not been good. Over that period, the plaintiff has sent a ‘stack’ of ‘threatening, intimidating’ emails to him. He said that he had been engaged in court proceedings with the plaintiff after his father went into a nursing home, although he did not say what those proceedings concerned. He said that the abusive emails caused a breakdown in the relationship that prevented them from working things out between them. As a result of those emails, the defendants resolved only to communicate with the plaintiff through their lawyers.
In cross-examination, the first defendant was questioned about the estate’s failure to respond to the plaintiff’s requests for information made in February, March, April and May 2013. The first defendant denied that he did not correspond with the plaintiff and denied, implicitly, that this was because of the caveat that the plaintiff had lodged on the estate property. He said that his solicitor did not send a copy of the probate inventory to the plaintiff’s solicitors any earlier than 7 June 2013 because probate was not granted until May 2013. Both defendants showed a marked dislike towards the plaintiff and both did not want to provide any information to him unless they were compelled to do so.
Both defendants denied that they did not distribute the undisputed amounts of the estate because they wanted a ‘bargaining chip’ against the plaintiff. They said that they wanted the disputes with the plaintiff settled before the estate was distributed. They agreed that the estate was in a position to distribute the assets to the beneficiaries from March 2014 but chose not to because of the dispute over $32,000 with the plaintiff, the dispute over executors’ commission of $35,000 and the costs incurred as a result of the issues with plaintiff.
The first defendant said he instructed the estate’s solicitors to seek commission at the rate of 5 per cent as that rate took into account the amount of time and effort they had made for the 12 months prior to the auction and because the sale price for the property was $185,000 more than the council valuation for the property. The first defendant agreed that the letter dated 13 March 2013 sent by the estate’s solicitor claiming this commission was sent with his knowledge and consent.[28]
[28]The plaintiff’s affidavit affirmed 13 November 2014, [33], exhibit AR14.
The first defendant also agreed that the letter dated 25 June 2013 sent by the estate’s solicitor was also written with his authority. He said that, on legal advice received, he instructed his solicitors to inform the plaintiff that the executors would be paid the commission at the rate of 5 per cent unless the plaintiff obtained an injunction to prevent the payment. Taken to the last paragraph of the letter, he agreed that it informed the plaintiff that payment of commission of $35,780 to the defendants would be paid within 7 days of the letter, and if the plaintiff wanted to challenge the payment, he could apply for an injunction to restrain the payment. However, the letter also stated that, in the absence of an application, the sum of $35,780 being commission would be paid to the defendants.[29] The first defendant also agreed that the import of the letter was that, if the plaintiff wanted challenge the commission of 5 per cent, he had to issue proceedings.
[29]The plaintiff’s affidavit affirmed 13 November 2014, [41], exhibit AR22.
Consideration of defendants’ claim for commission
For the purposes of considering the defendants’ claim for commission, I exclude any consideration of the manner and quantum in which commission was sought by the defendants.
The defendants rely on the work done by them in cleaning up the property, making it good for sale, resisting the proposal for units on the block adjacent to the property and dealing with the plaintiff, which they say has been acrimonious and stressful for them. In essence, they contend their work resulted in a substantial increase in the sale price for the property over and above the council valuation of $435,000. It was this result, they said that made them make the application for commission originally at 5 per cent. The defendants also rely on the fact that the property was tenanted for a time after it was sold to justify their work on the property. Apart from their own evidence, no other evidence was relied on by the defendants.
There is no question that work was done on the property by the defendants but, apart from their own views, there is no evidence that their work on the property was the reason for achieving the sale price of $610,000. The materials used for the improvements undertaken by the defendants were not costly, with the first defendant stating that no more than $12,000 to $13,000 was spent, with at least $9,000 of that amount being for the floor coverings. There is also no evidence that the impact of the defendants’ work regarding the VCAT proceeding for the block next door to the property was a factor in achieving the sale price.
The council valuation of $435,000 for the property was, as recorded on the valuation, based on data as at 1 January 2012. The rate notice does not disclose the method used for the council valuation. As at July 2013, some eighteen months later, the defendants obtained a valuation by Buchanan and Company Pty Ltd that valued the property at $535,000 based on comparable sales within the locality. The valuer stated in his report that the property ‘could be retained and renovated to be developed with a new home or possibly units with planning approval’ making the property attractive to both renovators and buyers who want a new home. In addition, the valuer considered the property was in an attractive and sought after location. When Hodges was retained for the sale, the defendants set the reserve price at $590,000. With the defendants relying on a council valuation that is two years old, there will be an obvious and marked difference between that valuation and a market valuation in a rising real estate market that has been evident in recent years. Whilst I accept that the defendants’ cleaning up the property made it more marketable in that it was much cleaner and presentable to potential purchasers, the view that the sale price is the result of the defendants’ work alone is not based on any credible evidence.
Part of the justification of the claim for commission is based on an estimate of the hours spent by the defendants in their role as executors, although quite properly, an hourly rate of commission is not sought by the defendants, reflecting the position stated by Slattery J in Hawkins v Barkley Brown.[30]The defendants may have used this approach to illustrate that the rate of commission now sought by them is reasonable compared to the hourly rate although this is not a useful comparison in claims for commission for the reasons set out in Hawkins.
[30][2010] NSWSC 48 (8 February 2010).
Although the defendants gave estimates for the hours spent by them on working on the property, working in relation to the VCAT proceedings in respect of the planning issue on the property next door, dealing with the conveyancing company, the selling agent and the estate’s solicitors, their estimates were not supported by any contemporaneous records kept by them. Accordingly, I attach little weight on their estimates and do not find them to be credible estimates. When all their asserted hours are added, each of the defendants’ estimated that they undertook a total of 1,450 hours work for the estate. Based on a 6 hour day, this number of hours equates to 242 days. The first defendant based his hourly estimate on working weekends and, after July, working perhaps 3 to 4 days a week. This equates at times to 6 days a week for some months considering the house was on the market towards the latter months of the year. Even so, it does not calculate out to anywhere near the number of hours claimed by the first defendant. The second defendant based her hourly estimate working mostly on weekends over one year. Working for 52 weekends of the year only adds up to 624 hours. I accept that the defendants spent time doing some work, principally on the property, but the work was not so onerous or as lengthy as they assert. In addition, clearly some of the work was performed by trades and professionals and that work should not form part of the defendants’ pains and troubles in an award of commission.
The remaining issue to consider is the estate itself. It is a simple estate with the value of the estate made up principally by the property. The collecting of the estate assets was, for all intents, completed by 28 February 2014 and was done principally by the solicitors for the estate. Apart from the property, the assets comprised some shares and money in the bank with the payment of monthly interest, requiring minimal work from the defendants. In respect of the property, the conveyancing was done by a conveyancing company and the sale was conducted by the agents, Hodges. The value of the estate was $715,275 as at the end of March 2014 with the net proceeds of the property being $591,630. The balance of the estate funds came from money from the estate of the deceased’s wife, some funds with IOOF Investment Management Ltd and some shares. It was not complicated to realise the assets or for the estate to earn income. I do not accept, as the defendants contend, that the administration of this estate was stressful and hard work in the sense of the collection of the assets and payment of the liabilities. The estate, or that part of it not in dispute, could have been distributed by March 2014. Had there been an interim distribution of the estate in March 2014, the interest component of the defendants’ claim for commission would be reduced by around $15,006. On the accounts now presented by the defendants, they claim interest on income of $18,800 that is paid into the estate account automatically and without any effort on the part of the defendants.
Although the defendants contend that the administration of the estate was hard work and stressful because of their negative relationship with the plaintiff, I consider that the defendants’ fixed and obdurate views on how the administration of the estate should be conducted, compounded by an aggressive approach to their task, has made the administration of this estate more complicated than it should have been. The defendants’ approach to the administration meant that they would not provide relevant information to the plaintiff and they would not distribute any part of the estate until all of the disputes with the plaintiff were settled in their favour. These decisions were inappropriate and unnecessary in the circumstances and relevant information should have been provided by the defendants to the plaintiff. The disputed amounts could have been retained and a partial distribution made to the beneficiaries by March 2014. It was also unnecessary because the disputes that the defendants rely on as at March 2014 are the loan/gift issue, the claim for commission at 5 per cent and the costs as a result of what they considered to be excessive correspondence between the parties. With more flexibility in their views, the defendants could have reached a resolution of these issues much earlier and avoided the expense of a trial.
I consider that the defendants should have an award of commission for their pains and troubles for their work done in cleaning up and working on the property, but the commission should not be based on their generous estimates of the work done and time spent by them for the following reasons:
(a) much of the administration of the estate was undertaken by professionals and some of the work done on the property was done by trades;
(b) there were no pains and troubles incurred by the defendants in the getting in of the shares and bank accounts or the receipt of interest;
(c) the estate administration should not have been complicated and should have been realised, at least substantially, after the sale proceeds from the property were received; and
(d) the defendants’ stated claim does not have a strong evidentiary basis.
Because of these factors, the defendants’ claim for commission at 2 per cent is too generous in the circumstances of the administration of this estate. In my view, the defendants should receive an award of commission based on 1 per cent of the net proceeds of the sale of the property being $591,630. This gives the defendants an entitlement of $5,916 to be divided between them in proportions that they decide.
Jurisdiction of the Court to order costs
The power of the Court to order costs under s 24 of the Supreme Court Act 1986[31] is exercised subject to and in accordance with Order 63 of Supreme Court (General Civil Procedure) Rules 2005 (‘the Rules’).[32] Pursuant to r 63.07, the Court may order that costs be taxed, or a portion of the moneys specified in the order be taxed or that the party pays a gross sum instead of taxed costs.
[31](1) Unless otherwise expressly provided by this Act or by the Rules, the costs of and incidental to all matters in the Court, including the administration of estates and trusts, is in the discretion of the Court and the Court has full power to determine by whom and to what extent the costs are to be paid.
[32]Supreme Court (General Civil Procedure) Rules 2005, r 63.02
The authorities concerning the costs in the administration of an estate are well known and conveniently set out in Hall v Carney (No 2).[33] Where probate litigation has been caused, or contributed to, by the way in which a testator made his or her testamentary intentions known, costs would usually be ordered to be paid out of the estate. If the litigation is in substance adversarial litigation, it is common for the court to apply the usual rule as to costs and make orders that one party pay the costs of the other and is not concerned about indemnification from the estate.[34]
[33][2012] SASCFC 105 (17 September 2012), [8]-[12] (Gray J).
[34]Murdocca v Murdocca (No 2) [2002] NSWSC 505 (25 June 2002); Warton v Yeo [2015] NSWCA 115 (7 May 2015) (Basten JA, Ward JA, Emmett JA); Fielder v Burgess [2014] SASC 98 (7 August 2014); Re Buckton; Buckton v Buckton [1907] 2 Ch 406, 414.
In respect of trustees’ costs, trustees are entitled as of right to indemnity out of the trust for expenses properly incurred;[35] that is, all costs except to the extent that they are of an unreasonable amount or have been unreasonably incurred.
[35]Dimos v Skaftouros [2004] VSCA 141 (20 August 2004), Dodds-Streeton AJA referring to National Trustees Executors & Agency Company of Australasia Ltd v Barnes [1941] HCA 3; (1941) 64 CLR 268.
The defendants’ costs
After the lunch break at trial, counsel for the defendants handed to the Court the relevant invoices from the solicitors for the defendants that were to be relied on in relation to the costs issues. The invoices were enclosed in two letters to the plaintiff’s solicitors. The first is dated 11 March 2015 enclosing copies of eight invoices. The second is dated 17 April 2015 enclosing copies of two invoices.
These invoices indicate that the solicitors for the defendants maintained four files. The defendants’ closing written submissions described generally what was the content of each file and how the costs were calculated, although the content is difficult to discern from the invoices and the calculation is not stated on the invoices.
The defendants have not produced any costs agreements with their solicitors in respect of these four files, with counsel from the Bar table informing the Court that his instructions were there are no costs agreement in place. It is, therefore, unclear as to the basis upon which the defendants retained the solicitors.
The lack of any costs agreements with the defendants may raise separate issues in respect of the solicitors’ obligations under the costs provisions of the Legal Profession Act 2004.
From the closing written submissions, the defendants assert the basis of the solicitors’ charging of fees but this is not referred to in the invoices. The submissions set out the hourly rates charged by the partner, an employee solicitor and a paralegal and assert that no uplift has been charged for care, skill and attention. The invoices, however, do appear to include a charge for ‘skill, care and attention’ in each invoice. The invoices themselves do not provide the relevant detail to ascertain the legal costs incurred in any meaningful way arising from the disputed issues. The closing written submissions also attach timesheets that the solicitors for the defendants prepared for the work done in relation to the invoices. These timesheets do not clarify the retainer of the solicitors for the defendants, particularly as counsel for the defendants also asserted in his written submissions that many of the invoices were assessed pursuant to the Practitioners Remuneration Order or the Supreme Court Scale.
Further, the costs of the defendants’ solicitors referred to in the affidavit verifying the estate’s administration account are different in the following respects to the invoices as follows:
Item Invoice No. Admin. Account Invoice Amount
30 131576 $820.91 $899.80
52/53 134320 $2,061.03 $1,489.01
59 135379 $15,868.38.38 $2,758.36
Nil 136428 Nil $8,316.00
Nil 136245 Nil $7,827.38
In written closing submissions, the defendants claimed that the amount of $15,868 was actually the total of invoices numbered 136245 for $7,552.38 (but invoice number 136245 is for $7,827.38) and 136428 for $8,316.00. These two amounts add to $16,143.38 and not the $15,683.25 in item 59 of the administration account.
In addition to the invoiced costs that total $50,386.31 (inclusive of GST), the defendants stated there are unbilled costs that have not yet been worked out as at the date of trial.
Further information is required to ascertain the total of the costs claimed by the defendants.
The four files as identified by the invoices are as follows:
(a) File 11070952 headed ‘Advice’ for the period 19 May 2012 to 19 November 2012 with invoice no 131576 in the sum of $899.80 (inclusive of GST of $81.80). Counsel for the defendants said this invoice was advice to the deceased during his lifetime regarding the loan to the plaintiff and the costs were charged pursuant to the Practitioners Remuneration Order.
(b) File 121437 headed ‘Estate of Deceased’ is for the probate of the estate for the amount of $11,539.59 (inclusive of GST). Counsel for the defendants said the costs were charged on a combination of the probate scale under Chapter III Appendix of the Supreme Court Rules, referring to rr. 9.01 and 9.03, and the Practitioners Remuneration Order. The total amount of $11,539.59 is made up as follows:
Time period Invoice no. Amount
16/11/12 to 6/6/13 132615 $5,502.21 incl. of GST of $488.26
18/6/13 to 27/11/13 133673 $2,439.01 incl. of GST of $221.73
29/11/13 to 30/3/14 134320 $1,489.01 incl. of GST of $571.47
9/4/14 to 10/9/14 135378 $2,109.36 incl. of GST of $191.76Total $11,539.59
(c) File 121541 headed ‘Adrian’s claims’ is in relation to advice on the caveat lodged by the plaintiff for the amount of $14,436.29 (inclusive of GST). Counsel for the defendants said the costs were charged pursuant to the Practitioners Remuneration Order. The defendants claim these costs against the plaintiff as being costs incurred in the estate that were unnecessary. The total amount of $14,436.29 is made up as follows:
Time period Invoice no. Amount
11/12/12 to 15/5/14 134550 $3,361.93 incl. of GST of $305.63
23/6/14 to 18/9/14 135379 $2,758.36 incl. of GST of $250.76
23/9/14 to 20/1/15 136428 $8,316.00 incl. of GST of $756.00
Total$14,436.29
(d) File 141509 headed ‘Claims by Adrian Supreme Court Proceeding No S CI 2014 06071’ is for the amount of $23,510.63 (inclusive of GST). Counsel for the defendants said these costs were charged on the Supreme Court Scale. The total amount of $23,510.63 is made up as follows:
Time period Invoice no. Amount
9/12/14 to 30/1/15 136245 $7,827.38 incl. of GST of $711.58
30/1/15 to 10/4/15 136667 $15,683.25 incl. of GST of $1,425.75
Total $23,510.63
Costs orders sought by the defendants
The defendants seek orders that:
(a) the defendants’ costs be paid from the estate on an indemnity basis based on the Supreme Court scale and, if there is a dispute as to the amount, then orders should be made that the costs be taxed; and
(b) the defendants’ costs be paid on an indemnity basis for the litigation file number 141509 being ‘Claims by Adrian Supreme Court Proceeding No S CI 2014 06071’ contending that the costs would not have been incurred if the plaintiff had admitted the loan moneys were owed and he had co-operated with the defendants in the administration of the estate.
Costs orders sought by the plaintiff
Although stated earlier, it is convenient to repeat the costs orders sought by the plaintiff. The plaintiff sought that the costs should be taxed by the Costs Court, with directions by the Court as follows:
(a) to disallow costs from the estate arising from its failure to make timely responses to the plaintiff;
(b) to disallow costs from the estate arising from any the claim for commission; and
(c) to apportion the value of any item where the fee claimed relates to an area that is disallowed and to an allowable charge.
The discrete area of costs able to be dealt with
Having considered the affidavits filed in the proceeding, the issues in dispute as articulated at the directions hearing and at trial, together with the submissions and the invoices produced for the four files maintained by the defendants’ solicitors, the following discrete areas that can be dealt with:
(a) the advice to the deceased during his lifetime said to be regarding the loan to the plaintiff with the invoice sent to the defendants;
(b) the loan/gift issue, including the Magistrates’ Court complaint;
(c) the withdrawal of the plaintiff’s caveat on the property;
(d) the application for the grant of probate of the will of the deceased;
(e) the claim for executors’ commission made in March 2013 and thereafter; and
(f) the litigation file number 141509, including the delay in by the defendants in responding to requests for information concerning the estate.
Advice to the deceased during his lifetime regarding the loan – file 11070952
The description of the work contained for the invoice for the ‘Advice file’ notes three telephone calls, preparing an advice, a small number of emails with the defendants and attending on the first defendant to provide her with a receipt for a cheque and council rates notice. The work is dated during the lifetime of the deceased. From the description of the work in the invoice, there is nothing that suggests the invoice relates to advice given to the deceased about the loan.
To the extent that the work relates to the loan/gift issue, it should be dealt with under that heading.
The loan/gift issue, including the Magistrates’ Court complaint
The issue of whether the amounts totalling $32,000 were loans or gifts and whether interest was payable was an acrimonious issue between the parties and was part of a bitter dispute arising well before the death of the deceased, including the period when the deceased’s wife was alive. From the plaintiff’s affidavit evidence, the issue was not clear cut from either side. It is by no means certain that the matters relied on by the defendants as stated in the letters from the solicitors for the defendant would have meant success for the defendants, particularly with their reliance on a purported loan document signed by the deceased in his lifetime in circumstances involving the solicitor for the defendants that, according to the plaintiff, was obtained in questionable circumstances.
Whilst the loan/gift issue was resolved by the date of the trial, with each side giving ground, it was, in reality, an adversarial issue that arose between the siblings years before when the plaintiff cared for both of his parents and has carried through to the present time.
The plaintiff conceded the sum of $14,000 was a loan in his solicitor’s letter dated 25 September 2014 resulting in the disputed amount being $18,000. Notwithstanding this concession, on 2 October 2014, the solicitors for the defendants informed the solicitors for the plaintiff that they were instructed to commence proceedings to confirm the amount of $32,000 was a loan due by the plaintiff to the estate. A proceeding was not issued by the defendants at or around this time but an attempt was made after the plaintiff issued this proceeding seeking distribution of the estate. The defendants then claimed at the first directions hearing that there was a proceeding issued in the Magistrates Court concerning, amongst other matters, a loan of $32,000 due to the estate notwithstanding that by this date, only $18,000 and interest was alleged to be in contention. I reject the defendants’ submissions that if the defendants had not brought the Magistrates’ Court claim, the plaintiff would not have admitted that the money was owed to the estate. For the reasons explained at [5] above, the Magistrates’ Court claim was not a valid claim.
The principal issues contained in the defendants’ Magistrates’ Court claim were threefold: the plaintiff’s alleged loan due to the estate, the interest said to accrue on the loan and orders for the plaintiff to pay certain costs at the time the claim was drafted by the solicitors for the estate. The claim addressed issues that were already before this Court in this proceeding and it was an abuse to purport to issue the Magistrates’ Court claim in these circumstances.
The document drafted for the purpose of the Magistrates’ Court claim is difficult to understand. The content of the claim is prolix and discursive rather than in the form of a conventional pleading. It is doubtful whether the claim as drafted would have survived a strike out application had the claim had been issued according to the Rules and proceeded in the Magistrates’ Court.
I consider that the defendants personally should be responsible for the payments of the plaintiff’s costs in respect of the Magistrates’ Court claim and the defendants personally should pay their own costs.
In my view, in the context of the longstanding issues concerning the loan/gift issue and its adversarial nature, the estate should not be burdened by the costs of the parties on these issues. Each side has made concessions on the issue. In respect of the loan/gift issue generally, the plaintiff and the defendants should personally bear their own costs.
The withdrawal of the plaintiff’s caveat on the property
In the plaintiff’s affidavit, he refers to the caveat lodged over his parents’ property on 30 August 2012 claiming that his father holds his interest in the property on behalf of himself and the plaintiff jointly by virtue of a constructive trust. The plaintiff explained that the caveat was registered on the property with the consent of his father and provided an explanation in the correspondence with the solicitors for the defendant for that occurring. He explained that the deceased had expressly told him that he did not want the property sold prior to his death and that the caveat was lodged because the first defendant, who held the deceased’s power of attorney, wanted the property sold prior to the deceased’s death.
By letter dated 14 December 2012 from the defendants’ solicitors, the defendant requested that the plaintiff withdraw his caveat immediately, stating that if this is not done by 19 December 2012, immediate steps will be taken to have it removed. The plaintiff gave instructions to his solicitors on 18 December 2012 for the withdrawal of the caveat and the withdrawal was registered on 9 January 2013. Although the defendants submitted that the caveat was ‘eventually’ withdrawn, that was not the case with it being withdrawn promptly.
The file headed ‘Adrian’s claims’ is said by the defendants to be in relation to advice on the caveat lodged by the plaintiff. The invoices describe work undertaken other than work relating to the caveat. The work on the file starts on 11 December 2012 and ends on 20 January 2015 with a total amount charged of $14,436.29 (inclusive of GST). Considering the caveat was withdrawn promptly after one letter, the costs in relation to the caveat should be minimal.
Like the loan/gift issue, the caveat issue dates back to events during the lifetime of the deceased and the bitter arguments between the parties at that time. In reality, it is a dispute between the siblings and should not be considered a matter of the administration of the estate.
In my view, based on the reasons for the caveat being lodged, the request for its withdrawal and its prompt withdrawal, the plaintiff and the defendants should bear their own costs on this issue.
The application for the grant of probate
The amount charged on the grant of probate file totals $11,539.59. The professional work undertaken for an application for a grant of probate and the subsequent administration of the estate is generally regarded as an estate expense. However, the costs of administration of the estate where the administration has been unduly or improperly prolonged should not be borne by the estate.
The description of the work done is not clear from the invoices, there appears to be duplication in the work done by the solicitors and the charges appear to be at the higher end for a modest estate of this kind.
This estate could have been partially distributed by March 2014, with the disputed amounts held back from distribution. It was because of the defendants’ fixed views on the finalisation of the estate that an interim distribution of the estate was not made and their fixed views prolonged the administration of the estate.
Whether the whole of the amount of $11,539.59 are expenses properly incurred requires further information concerning the work done, the amounts claimed and the basis of the rates charged by the solicitors for the defendants. The solicitors for the defendants are to prepare a bill of costs that provides the relevant detail as between solicitor and client for the application for the grant of probate for consideration by the Court.
The defendants’ claim for executors’ commission made in March 2013 and thereafter
Once settlement of the sale of the property occurred, the defendants made their request for executors’ commission. This request was based on a false premise: the letter details the commission rates charged by trustee companies of 5.5 per cent on capital and 6.6 per cent on income and ‘taking all these matters into account’, the defendants sought ‘a one off charge of 5 per cent on all moneys received’ calculated later at $35,780. Further correspondence occurred where the defendants alleged the plaintiff had agreed to the commission and the plaintiff disputed that any agreement was reached.
Then, by letter dated 25 June 2014, the defendants’ solicitors took the bold step of informing the plaintiff that the commission of $35,780 would be paid within 7 days of the date of the letter and a statement of receipts and expenditure would then be forwarded to the plaintiff. The letter then stated:
During the next 7 days, [the plaintiff] may apply for an injunction to restrain payment of the commission, if so advised. That application will create a platform from which [the defendants] can apply for commission, with all the consequences discussed. In the absence of such an application however, the commission will be paid, and the statement sent to you on behalf of your client as indicated above.
Further correspondence ensued between the solicitors for the parties on the question of commission with the defendants insisting that commission be charged at the rate of 5 per cent. This issue and other matters culminated in the plaintiff issuing these proceedings seeking distribution of the estate. It was not until the trial date that the defendants resiled from their long stated position of 5 per cent for the calculation of their commission and sought 2 per cent.
Rule 10.10 of the Rules provides the executor’s costs and those of ‘any other person’ shall be ‘in the discretion of the court’ and ‘may be allowed out of the estate’.
In Victoria, the general costs order appears to be that the executor’s costs, and those of any other party, be taxed as between solicitor and client and paid out of the estate.[36] However, despite the ‘general cost order’ an executor or their legal representatives should not utilise estate funds in making an application for executorial commission. In Re Estate of Zsuzanna Gray, Daly AsJ said:
utilising the funds of the estate for the payment of his legal costs to bring his claim for executor’s commission in the absence of the consent of the parties or an order of the Court was inappropriate in all the circumstances ... . Making a claim for commission is not of itself an executorial function in respect of which costs should automatically be borne by the estate. Ultimately, the liability for costs of any such application is and should be a matter for the Court, and no party should presume that the Court will invariably order that such costs would be recoverable from the estate. The question of costs is always a matter for the discretion of the Court, having regard to all of the circumstances of the case.[37]
[36] Condon v Miller [1981] VR 465, 468; Re White; Tweedie v Attorney General (2003) 7 VR 219, 235.
[37][2010] VSC 173, [34]
For the defendants to take such positions on commission as set out was untenable and wrong. It was reasonable and appropriate for the plaintiff to resist any claim for commission in the circumstances. The defendants’ claim was always foreshadowed at 5 per cent until trial and the plaintiff was justified in opposing that percentage claim. Further, the defendants did not make their position clear as to whether they were claiming commission after the directions were made in respect of the trial. The defendants did not file a summons seeking commission and submitted that any application for commission should be heard before an associate justice. This was notwithstanding the clear direction that all issues between the plaintiff and the defendants were to be heard at trial. On the day of the trial, two versions of an affidavit verifying the accounts was handed up part way through the hearing and contained inaccuracies. Whilst the defendants have been successful, in part, on the commission claim, they have not been so successful that they should be entitled to their costs of the application, either from the estate or the plaintiff.
Although the usual order in awarding costs to the successful party is made on a standard basis, the Court has a discretion to make a special costs order in special circumstances. In Ugly Tribe Co Pty Ltd v Sikola, [38] Harper J identified the following circumstances as warranting a special costs order, noting that the categories of circumstances are not closed:
[38][2001] VSC 189 (14 June 2001) [7]-[8].
(a) The making of an allegation, known to be false, that the opposite party is guilty of fraud: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397;
(b) The making of an irrelevant allegation of fraud: Thors v Weekes (1989) 92 ALR 131;
(c) Conduct which causes loss of time to the Court and to other parties: Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (unreported, Federal Court, French J, 3 May 1991);
(d) The commencement or continuation of proceedings for an ulterior motive: Ragata Developments Pty Ltd v Westpac Banking Corp (unreported, Federal Court, Davies J, 5 March 1993);
(e) Conduct which amounts to a contempt of court: EMI Records Ltd v Ian Cameron Wallace Ltd [1983] Ch 59;
(f) The commencement or continuation of proceedings in wilful disregard of known facts or clearly established law: J-Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers (WA) Branch (No 2) (1993) 46 IR 301; and
(g) The failure until after the commencement of the trial, and without explanation, to discover documents, the timely discovery of which would have considerably shortened, and very possibly avoided, the trial: National Australia Bank v Petit-Breuilh (No 2) (unreported, [1990] VSC 395, 18 October 1999).
In my view, the defendants’ initial claim for commission at 5 per cent and their threat to pay the commission in the circumstances as outlined was unjustifiable and made in disregard to clearly established law. This justifies an award of indemnity costs.
Accordingly, I order that the defendants personally are to pay the plaintiff’s costs in respect of the claim for executors’ commission, to be assessed on an indemnity basis. The defendants are to bear personally their own costs of their claim for executors’ commission.
The defendants’ costs for the litigation file no 141509, including the delay by the defendants in responding to requests for information concerning the estate.
The defendants contend that the costs on this file would not have been incurred if the plaintiff had admitted the loan was owed to the estate and had co-operated in the administration of the estate. I have concluded how the costs should be borne in respect of the loan/gift issue.
In respect of the plaintiff’s alleged failure to co-operate in the administration of the estate, the plaintiff sought information concerning the administration of the estate in a number of letters from February 2013. It was not until 9 May 2013 that a response was received from the defendants’ solicitors responding to his solicitor’s letters dated 17 February, 5 March, 12 April and 7 May 2013. It was a letter that gave some information but was dismissive of the plaintiff’s requests. By June 2013, further information was sent to the plaintiff letters dated 7 June 2013 and 19 June 2013.
In the letter dated 7 June 2013, the solicitors for the defendants assert that the plaintiff has no basis to complain about their conduct to the Legal Services Commissioner or any other authority as ‘we are simply following instructions. If we failed to do so, the executors would have cause to report us’. Executors and trustees have duties to keep the beneficiaries informed and to act in good faith. The duty of a trustee is to make a ‘full rather than a reluctant response’, both as to information and accounts.[39] In addition, under the Civil Procedure Act 2010, a person to whom the overarching obligations apply must use reasonable endeavours to act promptly and minimise delay.[40] The overarching obligations apply to a party in a civil proceeding and that party’s legal practitioner.[41] To the extent that there is an inconsistency between the obligation and the client’s instructions or wishes, the overarching obligation prevails to the extent of that inconsistency.[42]
[39]Re Whitehouse [1982] Qd R 196, 201. Jacobs’ Law of Trusts in Australia 7th edition [1713]-[1715] JD Heydon ML Leeming.
[40]Sec. 25 Civil Procedure Act 2010.
[41]Sec. 10 Civil Procedure Act 2010.
[42]Hudspeth v Scholastic Cleaning and Consultancy Services Pty Ltd (Ruling No 8) VSC 567, [160] (20 November 2014); see also Yara Australia Pty Ltd v Oswal [2013] VSCA 337 (27 November 2013) [26].
In the letter dated 19 June 2013, the plaintiff was informed that the sale of the house would be delayed because of the application for a building permit to develop town houses on the block next door to the deceased’s property. Correspondence continued but throughout the conduct of the administration, the plaintiff has faced a negative and dismissive attitude from the defendants towards his requests for information and accounts that, as a beneficiary of the estate, he is entitled to receive.
A review of the correspondence shows that the defendants were not keen to provide timely information and have been antagonistic and unreasonable in their attitude towards the plaintiff. This ultimately led to the plaintiff issuing this proceeding seeking distribution of the estate.
In this case, the defendants have allowed their emotions to cloud their judgment. The result of this proceeding is that the plaintiff has been successful in his claims and he should be entitled to the costs of this proceeding to be paid by the defendants personally. Further, in view of the defendants’ attitude towards informing the plaintiff of estate matters, in my view, the estate should not bear the burden of the costs of the defendants in this proceeding.
These orders include the costs of the affidavit by the defendants’ solicitor sworn 11 December 2014 that deals with the purported Magistrates’ Court claim and exhibits a letter dated 9 December 2014 from the defendants’ solicitor to the plaintiff’s solicitor. At the directions hearing, I reserved the costs of that affidavit. I have determined that the defendants personally should bear the costs of the matters relating to the Magistrates’ Court claim. The letter dated 9 December 2014 from the defendants’ solicitor to the plaintiff’s solicitor seeks to answer the plaintiff’s affidavit and contains mostly irrelevant and inadmissible matters and any costs incurred by the plaintiff as a result of the affidavit should be borne by the defendants personally.
Orders
On or before 31 July 2015:
(a) the parties are to prepare minutes of proposed orders reflecting these findings;
(b) the solicitors for the defendants are to prepare a bill of costs that provides the relevant detail as between solicitor and client for the application for the grant of probate; and
(c) the parties are to prepare an agreed list of any further matters that remain to be determined.
Any further matters that remain to be determined will then be fixed for hearing.
---
7
14
0